Gold finished in deep red on Monday as worries about a wider conflict in the Middle East eased, prompting investors to reduce exposure to so-called safe havens.
Specifically, the gold contract fell 2.8% to $2,346.4 per ounce.
Spot gold was earlier down 2.5% at $2,330.51 an ounce, its biggest daily loss in more than a year.
The risk of an uncontrolled escalation of the conflict in the Middle East after the exchange of blows between Israel and Iran in the previous days has receded in the last 24 hours. Tehran chose again today to play down the impact and significance of the recent Israeli raid, saying on Monday that Israel has received “the necessary response at this stage”, as reported by Bloomberg.
The fact that the Iranian regime is downplaying Israel’s response — and has not indicated how it wishes to retaliate — has taken some of the risk premium out of the market, ABC Refinery’s Nicholas Frappell told Bloomberg. Declining oil prices also support the idea that tensions in the Middle East are easing, he adds.
“Some of the risk of retaliation in the Middle East has been removed, which has led to liquidations in gold. But the question is how much downside is there,” Daniel Ghali of TD Securities told Reuters.
Geopolitical tensions along with strong central bank purchases of the precious metal drove prices to a new record high of $2,431.29 on April 12.
Spot silver fell 5% to $27.22 an ounce, its biggest drop in more than three years. Platinum lost 0.9% to $923.55 an ounce, while palladium fell 1.3% to $1,013.25 an ounce.
